ISLAMABAD, Oct 2: Russia is reported to have agreed to invest up to $500 million for expansion, rehabilitation and modernisation of Pakistan Steel Mills and a Pakistani delegation will visit Moscow to finalise financial and technical terms of the project as agreed in a memorandum of understanding signed by the two countries on Monday.

Addressing a joint news conference here on Tuesday, Chairman of the Board of Investment Saleem H. Mandviwalla and Russian Trade Representative in Pakistan Yuri M. Koslov said a formal contract would be signed in December.

Mr Mandviwalla said the memorandum was about modernisation, reconstruction and expansion of production capacity of the Pakistan Steel by up to 1.5 million metric tons.

He said Russia’s Tyazhpromexport company, which had helped Pakistan establish the plant would carry out technical audit.

In energy sector, Genco entered into a framework cooperation agreement with the Russian company, Technoproexport, for conversion of the Muzaffargarh thermal power plant from furnace oil into coal and construction of a new power plant at Jamshoro.

The two sides agreed to consider the setting up of a new plant with a capacity of 500MW to 600MW.

They also agreed that 15 per cent of funds will be provided by Genco and 85 per cent through a loan against sovereign guarantee of Pakistan.

A working group has been formed to discuss all matters and pending issues relating to the project.

According to BoI, some new projects were introduced during the second session of the Pak-Russia Inter-Governmental Commission and Technoproexport expressed willingness to discuss new projects, including Tarbela-IV and Keyal Khawar power projects.

The MoU signed between the ministry of railways and Transmashholding, the largest Russian transport machine-building industry, concerns identifying railway projects in Pakistan, including manufacturing of locomotives, compatible signalling system and other advancements and solutions.

Funding sources for the projects will be identified – private and public sectors, export credit agencies, multilateral development banks and other international finance institutions.

The two organisations will set up a committee to discuss potential areas of cooperation and work to create a favourable investment climate.

Transmashholding, with a turnover of $2.4 billion, annually builds industrial electric locomotives, mainline diesel locomotives, passenger coaches and other machines.

Representatives of the company visited Pakistan early this year and held fruitful negotiations with the ministry of railways. It intends to take part in tenders for the supply of passenger carriages.

Russian Trade Representative in Pakistan Yuri M. Koslov expressed the hope that the current process of dialogue would yield positive results and Russian engagement in Pakistan’s development sector would expand in the years to come.